Bull Market in Stocks Is Justified by Earnings

We’re still in the heart of earnings season, with more than 40 percent of the S&P 500 companies accounted for.

A few observations are already noteworthy. Most importantly, third-quarter corporate profits and revenues rose faster than expected and additional information is unlikely to change this trend. Also, the economy more broadly is performing better than forecast. Gross domestic product increased 3 percent in the quarter, a very solid number considering that hurricanes disrupted growth during the period. The momentum behind the data suggests a positive near-term outlook for U.S. companies and the economy. Although stock prices have done quite well recently, there’s every reason to expect more gains in the months ahead, as well as more weakness in the bond market.